How Macy’s can turn its business around when department stores are struggling

Macy’s needs to reignite its creativity by offering more exciting products in stores and hosting engaging events Attracting younger generations again, According to activist investor Barrington Capital.

Those are just two of many changes the activist investor says are necessary to turn around Macy’s, which once established itself as a major department store but has struggled to keep up with rapid industry changes and competition.

Jim Mitarotonda, CEO of Barington Capital Group, made it clear he was confident in Macy’s executive leadership, saying there was “no reason” the company couldn’t improve its business execution. While Macy’s CEO Tony Spring and CFO Adrian Mitchell “have a good understanding of the retail sector,” Mitarotonda told FOX Business that “thinking has to change.”

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Barington Capital, Thor Equities LLC and their affiliates, which are Macy’s shareholders, recommended that the retailer make changes to its capital allocation strategy and consider other structural measures to improve shareholder value.

Mitarotunda said the company needed to bring in “great dealers.” Spring wasn’t on the business side when he headed Bloomingdales, so it was important for him to bring in a highly creative team that included people with strong marketing and fashion skills, according to Mitarotunda.

“If the product isn’t exciting, they (customers) won’t go to the store or even go to the Macy’s website. That’s not going to happen. So it’s really about the product and creating exciting events to motivate people in the store,” Mitarotonda said.

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The company should also strengthen its digital marketing strategy, including leveraging influencers. Attracting younger consumers is crucial in helping the company penetrate the vast retail options available to the American consumer today, according to Metarotunda.

“Young people are going to TikTok. They’re going to Instagram, they’re going to Threads, they’re going to all these other things that older people aren’t just drawn to,” he said. “They (Messi) need to think about that. They need to bring back the excitement that has been there for a long time again.”

The president of Barington Capital praised Dillard’s, another major department store, for its strong performance, highlighting its success in both merchandising and improving business execution, which led to a significant increase in margins.

Over the past year, Macy’s shares have fallen more than 16%. During the same time, Dillard’s stock rose more than 11%.

Metarotonda also suggested that Macy’s should separate its operating company from its real estate business, meaning that Macy’s should create a separate real estate company that would own the property, with the operating company paying rent to the real estate company.

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This “will not hurt retail at all,” Mitarotunda said. On the contrary, he said it would “make them better.”

This would create more transparency, allowing shareholders and the financial community to clearly see the revenues and expenses of every part of the company, Mitarotonda said. Additionally, by having a real estate professional manage the real estate side, rather than a retailer, the company believes it will help maximize the value of the property.

The company also proposed spinning off the company’s luxury brands, such as Bloomingdale’s and Bluemercury, which continue to have positive sales in stores.

If Bloomingdales and Bluemercury traded independently from Macy’s, they would trade at higher multiples than the parent company, Mitarotonda said.

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“It is essential that the board and management team look at how to maximize value for the owners of the company for the shareholders who are themselves,” he said.